Were store-window display, prop-rental, flower-arrangement, installation, and design charges taxable in Texas?

Plain-English summary

The Comptroller said transferring store-display props or other tangible personal property to a customer for consideration was a taxable rental.

Separately stated labor and service charges for installing, applying, remodeling, servicing, maintaining, or repairing the rented item were also taxable. On the sample invoices, tax applied to the total amount, including the window display, prop rental, and flower arrangement charges. The provider could issue a resale certificate when buying property that it would rent to customers.

The result was different for ideas alone. If the store supplied every material used in the display and the provider supplied only design and decorating concepts, the provider performed a nontaxable service.

What this means for you

Visual merchandisers and decorators

Determine whether the customer receives any rented property. Once the arrangement includes props or other tangible items, related installation and service charges were taxable under this letter.

Retail stores

A pure design engagement, with the store providing all materials, received different treatment from a turnkey display with rented items.

Common questions

Was prop rental taxable? Yes.

Were separately stated installation charges taxable? Yes, when connected to the rented property.

Were flower-arrangement charges taxable on the sample invoice? Yes.

When were design services nontaxable? When the provider supplied only ideas and the store supplied all materials.

Why does the page use a 1992 issued date? STAR metadata dates the document January 22, 1992, while the extracted letter heading visibly ends at “January 22, 199.”

Citations and references

The letter references an enclosed rentals rule, but the extracted citation is incomplete (“Rule 3.29 -”), so this page does not supply a corrected rule number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1151E14

Original ruling text

January 22, 199

Dear ***:

Thank you for your recent letter concerning the rental of props
used in store window displays.

A taxable rental occurs whenever your client transfers tangible
personal property to a customer for consideration. Separately
stated charges for labor or services rendered in installing,
applying, remodeling, servicing, maintaining, or repairing, the
item being rented are subject to tax. See the enclosed Rule 3.29

• on rentals and leases of tangible personal property.

Based on this your client should charge tax on the total amount
on the sample invoices you enclosed. The total amount includes
the window display, prop rental, and flower arrangement charges
in the sample invoices. Your client may issue a resale certificate
to purchase tax free, tangible personal property that he or she
rents to customers.

Your client is performing a non taxable service only if he or
she provides design and decoration ideas without renting tangible
personal property to the store as part of the service. This
would be the situation if the store provides all the materials
used in the display and your client provides only the concept.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion may change.

You may call me toll free at 1-800-252-5555, ext. 5-0030. The
direct line is 512/475-0030. You may also write to Tax
Administration, Comptroller of Public Accounts.

Sincerely,

David Somerville
Tax Administration Division